A few things;
First of all, bitcoin mining would be perfectly suitable to switch dynamically from one location to another, far easier than any other form of data processing. You are probably thinking it cant because the hardware is so expensive, but thats only temporarily. IN the long run, electricity cost will be far more important than the hardware cost.
Secondly, varying electricity costs over time for a google/facebook/ebay datacenter is something else than for bitcoin. Those companies look at 10+ years to select a location for a major DC, miners currently have an horizon of a few months and I figure, in the future of at most a few years.
Lastly; at least in Iceland they guarantee you the price for up to 20 years.
http://www.greendataisland.com/whyiceland.htmlAnyway, the main point is that at current exchange rates, electricity price of all mining really isnt going to make a difference. So what if you max out a local small hydroelectric plant causing local prices to go up (which would be unlikely already), you will just put your miners somewhere else, or if you dont, someone else will. This is about as "profound" as one particular collocation provider running out of rackspace and therefore increasing its prices. So what?
(1) I agree that electricity cost will be far more important, but that does not mean that the hardware cost will be trivial. And that hardware has to get to the cheap electricity somehow. That means that there are transportation costs, fuel costs, costs to lease space, costs to move personnel, and that's just a few off the top of my head. To the extent that hardware moves to cheap electricity, there will still be a cost to move that hardware away. And this cuts both ways - if the transfer costs are low, that just means that more hardware will move to low cost areas, further driving up demand and thus price. The real question is the supply of cheap electricity - Bitcoin mining may not have enough of an impact to increase the price of electricity in most areas where price is higher, but, if concentrated, it may impact the price in areas where the price is lower.
(2) That may be true, but aren't you doing a longer term analysis?
(3) That's interesting - I did not know that about Iceland - how much electricity will they guarantee for low rates at 20 years? Are there any restrictions?
Again, my only point is that, to the extent that bitcoin mining increases to the point where ASICs are a commodity, it is unlikely to benefit from significantly below market electricity prices. I may very well be wrong - maybe there's a bunch of places with stable internet connections and 1.21 gigawatts of continuous electricity available at $0.02 per kwh. If that's the case, I'm wrong, I just haven't seen that yet.
